11.4 A new B/C category salary scale for Hungary at 1 January 2005Proposal by the Inter-Organisations Section (IOS)

——————————————

Introductory Note by the IOS

N.b. Staff mobility across borders is theoretically addressed by the A/L category grade pay system which guarantees the same purchasing power to all staff, at the same grade and step, through the application of PPP coefficients to the common A/L category base scale for Belgium. In contrast to this, B/C category scales are linked, in each duty station country, to a part of the local labour market, and thus cannot address mobility.

Scale implementation

IOS has finished its work to calculate a new B/C category salary scale in Hungarian Forints for CO support staff on duty in Hungary at 1 January 2005. However, IOS recommends the implementation of this new scale with an important precondition. This is that the CO that wish to apply this scale must first convince their governing bodies exceptionally to allow the suspension in Hungary of the application through the CO reference index of the effects of purchasing power parity adjustments on the new B/C category scale. Should this condition not be met, IOS expects that implementing the new scale would not solve the issue, because the same kind of operation would have to be done periodically, since the salary scale for B/C category staff in Hungary is not linked via the PPP to the corresponding scale in Brussels, unlike the A/L category scale, which is. Repeated reductions (in the 1 January 2003, 2004 and 2005 adjustments) of CO salaries in Hungary for category B/C staff, cannot be justified by PPP adjustments in a logical way. We can expect the extraordinarily large gap now separating the B6 and A2 basic salaries in Hungary to reduce to a proportion common in Western European CO duty station countries in the future. Until that time, any change to the B/C category scale, made without first addressing this issue, will appear highly inequitable.

Practical considerations

B/C category staff in Hungary currently are not paid from the 1 January 2005 CO salary scale, but differently by virtue of the application of the procedure in Article 11 of the CCR’s 139th Report.

Also please recall that the gap separating the basic salaries of the A2 and the B6 in Hungary is far wider – the A2 is paid 257% above the B6 – than in any other duty station country. The proposed B/C scale will bring this gap down to “only” 175 %, whereas this gap only surpasses 70% in Hungary. In most CO duty station countries it is much lower and the gap actually is even slightly inverted – the B6 salary is slightly higher than the A2 salary - in two of the seven reference countries, both hosting over 500 CO B/C staff.

Proposal by the IOS

Reference text:

The CCR Chairman’s 139th Report, approved by the Council of Europe’s Committee of Ministers at its meeting of 27 November 2002 states:

“Article 13: Measures to apply in duty countries where small numbers of staff are assigned

Notwithstanding Article 5, in countries where less than fifty persons are assigned by one or more Co-ordinated Organisations, the Secretary/Director General concerned may, after consulting with the IOS, propose appropriate remuneration measures to his governing body in order to take account of recruitment and retention difficulties specific to his Organisation. The Head of the IOS shall annually inform the CCR Chairman of any changes in these measures.”

Executive summary

At the Council of Europe’s request and under the terms of article 13 above, the Inter-Organisations Section (IOS) has calculated a new salary scale in Hungarian Forints at 1 January 2005 for the Co-ordinated Organisations (CO) B/C category personnel on duty in Hungary. The first CO B/C category salary scale for Hungary was calculated by IOS in 1994 on the basis of United Nations salary survey data collected in 1992 among a sample of firms then reputed to be among the “best local employers” in the country and updated since then by CO adjustment indices for Hungary. The new scale is based at 1 January 2005 both (1) on a sample of net salaries paid by private sector employers at the third quartile of the Watson Wyatt Worldwide Data Services (WWW) sample of firms in Hungary and (2) on the net salaries paid for comparable jobs in Hungary by the United Nations. This new scale, calculated at that date, is 30 % higher than the updated B/C scale from 1995. The reasons for this gap appear to be the result of three factors explained below. Under article 11 of the 139th Report, the Council of Europe already suspended the application of the B/C salary scale at 1 January 2003, 2004 and 2005, to avoid the negative adjustment of salaries implied therein. This means that Council of Europe B/C staff are paid a higher salary level than the CCR recommended scale for 1 January 2005, but still well below the newly calculated scale recommended by IOS.

Background

The first CO salary scale for Hungary was established following a request from the Council of Europe, as part of establishing a European Youth Centre (EYC) in Budapest. It was implemented on the basis of a CCR recommendation to Councils at 1 January 1995, and was subsequently updated at 1 January each year according to the CCR salary adjustment procedure. The CCR’s 22nd Report to Councils made two important changes from 1993. It ended all B/C category salary surveys by IOS, and it made adjustments of B/C category scales the same as adjustments for A/L category staff in each duty station country. The A/L system, however, does not look at the local market, but rather combines a 7-country civil service “reference” index, local CPI and relative changes to the purchasing power parity (PPP) coefficient. Due to the high cost of a salary survey, IOS could not have made one in a duty country for only ten CO B/C category posts even before the CCR’s 22nd Report. So, it followed its past practice and turned instead to the United Nations’ most recent local salary survey for Hungary, which had been carried out in 1992.

IOS generally has been able to keep the three committees (CCR, CRSG and CRP) informed of comparators’ pay for B/C category staff in the countries covered by its four yearly surveys of the public sectors, in a number of international organizations. IOS’ consultant’s (WWW) surveys of the private sectors in ten recruitment countries regularly have extended this pay data. However, pay in other duty countries like Hungary has been largely left to evolve without review.

At the request of its administration and staff in Hungary, the Council of Europe asked IOS in 2004 to look into ways of verifying the levels it paid to its B/C category staff in that country. Following IOS discussions with WWW, IOS attempted to make the best possible estimate of a new B/C category salary scale for Hungary in line with the methodology IOS had followed when it had been responsible for carrying out regular local salary surveys for B/C category staff scales.

The method followed

IOS wished to provide the Council of Europe with as close an estimate as possible of what an IOS survey in Hungary in 2005 would show as results, on the basis of the same principles it followed in its actual salary surveys of the “best local employers” and including the UN in the country sample, as the reference international organisation in Hungary.

Because the United Nations’ 1992 local salary survey had been the sole source of information leading to the original 1995 CO B/C scale in Hungary, a wider scope was sought in this verification process, and considering that the earlier methodology assigned an 80% weight was given to private sector results and the remaining 20% to the salary levels paid in Hungary for B/C category jobs by the international organisation taken as a reference, i.e., the UN.

As IOS already had negotiated with WWW the terms of the far larger 1 January 2004 benchmark survey of ten recruitment countries’ private sector pay data for A and B category jobs, it was financially advantageous for IOS to ask WWW to supply a smaller additional private sector pay study for Hungary at 1 January 2005.

In order to make the best approximation in January 2005 of an IOS local salary survey, as they were conducted before 1993, IOS first requested pay data from WWW for Hungary’s private sector sample at the third quartile for the job descriptions for B category staff used in all 2004 IOS benchmark surveys. This was done to approximate a selection of the best local employers, as IOS had made in all local salary surveys until 1992. The third quartile of private sector pay is also the level sought by the UN when it surveys the local market via its own salary surveys to establish the UN “G” category (support staff) salary scales. IOS then verified the net pay levels from the private sector in Hungary in January 2005, and a private sector net-of-income-tax, minimum salary level was then found for each CO B/C grade by averaging the net results for these jobs. Finally the private sector results were weighted by 80% and combined with the net pay value for the UN G grade equivalents to CO B/C levels, weighted by 20%, to calculate the CO B/C net pay level at the minimum step in each grade.

Implementing the proposal

The Council of Europe told IOS the importance it places on a having a good salary scale for support staff in Hungary, in light of the growing importance of the role played by its European Youth Centre (EYC) in Budapest. The apparently large difference ( + 30%) between the official 1 January 1995 scale, updated to 2005, and the recalculated 1 January 2005 scale in fact represents an average annual drift of roughly + 2.7%, and is probably explained by the three reasons referred to in the executive summary above: (1) application to the B/C scale of the negative effects of the PPP in the CO adjustment index over three years; (2) differences between the private sector firms actually surveyed by the UN in Hungary in 1992 and the firms participating in WWW’s salary benchmarking exercise in Hungary in January 2005, and (3) different trends in actual private sector salaries paid in Hungary compared to the CO adjustment index – which looks instead at the seven reference civil services’ pay settlements and changes in local CPI and in the PPP between Budapest and Brussels since 1995.

At the same time the costs to implement the proposed scale in Hungarian Forints are limited to the budgetary establishment of B/C jobs in Hungary, expected by Council of Europe management to remain in future around the current 10 total B/C posts.

Recommendation

IOS recommends any governing body of a CO employing B and C staff in Hungary to:

-approve the new salary scale for B and C grades in Hungary as of 1 January 2005-suspend the effects of purchasing power parity adjustments on B and C category scales in Hungary in the 2006 salary scale and in any subsequent year in accordance with the provisions of the 139th report or subsequent reports that may follow it, at least until the gap between basic salaries for grade A2 and B6 falls below 70%.

John HamiltonHead of IOS

Note 1 This document has been classified restricted at the date of issue. Unless the Committee of Ministers decides otherwise, it will be declassified according to the rules set up in Resolution Res(2001)6 on access to Council of Europe documents.